Greece 'urged to cut deeper' to unlock EU-IMF-ECB loans

Greece was under pressure from international creditors to beef up a controversial austerity package in return for loan relief, officials said, as Prime Minister Antonis Samaras said a deal was in sight.

Samaras told Kathimerini daily newspaper yesterday that the cuts could be approved by parliament "in a matter of days" after a European summit on Thursday that will discuss Greece's economic situation.

He added that by Thursday his government and a mission of EU-IMF auditors "will have fully concluded an agreement on fiscal and structural prior actions" required to release €31.5 billion (HK$316.16 bilion) in loans pending since June. Greece has been in talks with the so-called troika of creditors - the European Union, International Monetary Fund, and the European Central Bank - for the last three months.

The government thought that a new austerity package worth €7.8 billion this year would be enough to unblock the loans. But the troika are now demanding €9.2 billion in savings, according to the finance ministry.

"We say €7.8 billion, they say €9.2 billion. We have to converge," a finance ministry source said after talks with the auditor mission on Saturday. The EU-IMF auditors say a greater-than-foreseen recession will undermine the government's forecasts, as will the need to support a new state health organisation that is deeply in debt.

Despite attempts to trim it through a write-down, Greece's debt is expected to increase from 169.5 per cent of output this year to 179.3 per cent in 2013, according to next year's draft budget. Athens has committed to cutting its debt levels to 120 per cent of output by 2020.

The ECB and the IMF believed that Greece's debt would be some 140 per cent of gross domestic product in 2020, while the European Commission was more optimistic, seeing a level of 128 per cent, German magazine Der Spiegel reported yesterday.

Greece seeks a two-year extension from its creditors to apply the cuts and reforms, a breather the IMF is prepared to grant but which some euro-zone states say will require more money for struggling Athens.

The government has so far calculated an austerity effort of €13.5 billion in 2013-2014.

"But if an extension is not granted, measures worth €18 billion would be necessary," a Greek finance ministry source said.